Limited Liability Partnership
Can a Body Corporate Be a Partner in an LLP
A body corporate is a legal entity with its own rights and duties, separate from its members.
6 min read
Convert Private Limited Company to LLP
Keep the separate legal identity and the limited liability, and drop the statutory registers, the board meetings and the mandatory audit. An LLP is run by its partners under an agreement they write themselves.
- Name reservation for the LLP
- Resolutions and the incorporation documents drafted
- LLP Form 17 and Form 2 filed for the conversion
+3 moreShow less
- LLP agreement drafted, stamped and filed with the MCA
- Application for the change in PAN and TAN
- Typically completed in 20 to 25 working days
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Converting a private limited company into an LLP
What an LLP keeps of the company structure and what it drops, the four conditions that have to be satisfied first, and why owners choose LegalWiz.in.
An LLP offers the benefits of both a partnership and a company, so converting a company into one gains operational flexibility without giving up what matters. The characteristics of being a separate legal entity and of limited liability are unchanged. What moves is control: operations and management come directly into the hands of the partners, where in a private company they sit with the directors.
An LLP is governed by the LLP agreement executed by its partners. It has fewer compliance requirements and is easier to operate: it does not have to maintain statutory records and registers, and the requirement of a statutory audit is relaxed. It preserves the benefits of a partnership while providing the security and credibility of a company.
The conversion has to be approved by the Ministry through an online application with the necessary documents. Four conditions have to be satisfied before it can be made, and the one that most often stops a conversion is that no security interest may subsist over the company’s assets on the date of conversion.
- Governed by
- LLP Act, 2008
- Partners
- Every member
- All members of the company become partners
- Registered charges
- Must be nil
- No security interest may subsist over the assets
- Income tax returns
- Up to date
- Filed under the Income-tax Act, 1961
- Filed in
- LLP Form 17 and Form 2
- Filed online with the MCA
- Capital gains
- Not payable
- Provided the profit-sharing ratio is unchanged
- Statutory audit
- Above ₹25L or ₹40L
- Contribution above ₹25 lakh, or turnover above ₹40 lakh
- Turnaround
- 20 to 25 working days
- Subject to government processing
Why owners choose LegalWiz.in
- An expert team of qualified CA, CS and lawyers
- A dedicated relationship manager with on-call support
- The entire conversion is handled online
- Quick turnaround and economical pricing
- Thousands of happy customers across every state in India
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What the conversion covers
Your relationship manager and the filing team handle everything below. You supply the documents once and approve the drafts.
- Consultancy and assistance for the conversion
- Digital Signature Certificate (DSC) for the existing directors
- Application for name reservation for the LLP
- Drafting of the necessary resolutions for the company
- Drafting of the incorporation documents
- Filing of LLP Form 17, the application for conversion
- Online filing of LLP Form 2 and the Certificate of Incorporation
- Application for the change in PAN and TAN
- Drafting of the LLP agreement, and payment of stamp duty on it
- Filing of the LLP agreement with the MCA
Government fees and stamp duty are charged at actuals. No security interest may subsist over the company’s assets on the date of conversion, so a registered charge has to be satisfied and closed before the application can be filed, so check the company’s master data first.
The four conditions for conversion
Every member becomes a partner
All the members of the company, and only they, become the partners of the LLP on conversion.
No charge on the assets
No security interest may subsist or be in force over the company’s assets on the date of conversion: they have to be free of any encumbrance.
Returns filed and up to date
Income tax returns must have been filed up to date under the Income-tax Act, 1961.
Other approvals obtained
Any clearance, approval or permission for the conversion required from another authority must already have been obtained.
Benefits of converting a company into an LLP
Rewards and returns to partners
Partners of an LLP receive multiple returns: remuneration for active participation, a share of the profit generated by the business, and interest on the capital they have contributed.
Independent liability
No partner is liable on account of the unauthorised actions of another. Individual partners are shielded from the joint liability another partner’s wrongful business decisions or misconduct would otherwise create.
Less statutory compliance
There is less to comply with than in a private limited company. An LLP does not have to maintain statutory records and registers, and the requirement of a statutory audit is relaxed.
Operational flexibility
The partners are directly involved in the day-to-day operations and management. Unlike a company, an LLP is governed by an agreement the partners execute between themselves.
How an LLP compares with a private limited company
The two columns that matter to you are the first and the second. The rest are here for completeness.
| Attribute | Limited Liability Partnership | Private Limited Company | One Person Company | Partnership Firm | Proprietorship Firm |
|---|---|---|---|---|---|
| Setting it up | |||||
| Applicable law | LLP Act, 2008 | Companies Act, 2013 | Companies Act, 2013 | Indian Partnership Act, 1932 | No specified Act |
| MandatoryMust be registered with the MCA under the LLP Act | MandatoryMust be registered with the MCA under the Companies Act | MandatoryMust be registered with the MCA under the Companies Act | OptionalCan be registered or unregistered, though there are clear benefits to registering with the State ROF | Not requiredMSME or GST registration is treated as valid proof for a proprietor firm | |
| 2 to unlimitedMinimum 2 designated partners, no cap on the total | 2 to 200Excluding present or former employees who are members | Only 1A single shareholder | 2 to 50Minimum 2 partners, maximum 50 | Only 1The proprietor is the sole owner | |
| AllowedUnder RBI and FEMA rules, usually via the automatic route | AllowedUnder RBI and FEMA rules, usually via the automatic route | Not allowedMember, nominee and director must be Indian residents | AllowedAn NRI can be a partner, subject to RBI regulations | Not allowedA foreign national cannot own a proprietorship business in India | |
| What you are liable for | |||||
| YesCan enter contracts and own assets in its own name | YesCan enter contracts and own assets in its own name | YesCan enter contracts and own assets in its own name | NoThe firm has no identity separate from its partners | NoProprietor and business are the same, and share one PAN | |
| LimitedLimited to the contribution agreed in the LLP agreement | LimitedLimited to the share capital subscribed, unless the MOA defines it otherwise | LimitedLimited to the share capital subscribed | UnlimitedPartners are jointly and severally liable for the debts | UnlimitedClearing the firm’s liabilities is the proprietor’s job | |
| YesA change of partners does not affect the LLP | YesSurvives a change of ownership or management | YesBut it can only ever have one owner | NoA change of partner dissolves or reforms the firm | NoDeath or insolvency of the proprietor ends the business | |
| YesBy consent of the other partners, via a supplementary deed | YesShares transfer easily, which is why external investors prefer it | Restricted100% of shares must move to change the single owner | RestrictedThe partnership deed sets out the restrictions | NoA proprietorship cannot be transferred | |
| What it costs you every year | |||||
| As applicableRequired once turnover crosses ₹40 lakh or contribution crosses ₹25 lakh | MandatoryAn auditor must be appointed within 30 days | MandatoryAn auditor must be appointed within 30 days | Not mandatoryTax audit applies based on turnover | Not mandatoryTax audit applies based on turnover | |
| High30% on business profits, with tax-efficient distribution to partners | Moderate25% for companies with turnover up to ₹400 crore | Moderate25% for companies with turnover up to ₹400 crore | High30% on business profits | LowTaxed at the proprietor’s individual income tax slab | |
| ModerateAnnual filing plus a few event based filings, lighter than a company | HighThe heaviest of the five, both annual and event based | HighSimilar to a company, without an AGM | LowAn annual ITR, and little else | LowNo separate ITR, and very little else | |
| Next step | Get started | Know more | Know more | Know more | Know more |
Swipe the table sideways, Limited Liability Partnership stays in view. Open any attribute to read the detail behind all 5 answers.
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Documents required to convert a company into an LLP
This checklist is about the company rather than the people. Most of it is proof that the four conditions are met.
Consent of directors and shareholders
The consent of all the directors and shareholders of the company to the conversion, in the prescribed format.
Clearance from the tax authorities
A no objection certificate from the tax authorities has to be obtained.
Creditors’ approval
A list of all the secured creditors of the company, together with their consent to the conversion.
Financial statements
The financial statement of the previous year, along with the income tax return filed.
Digital signatures
The DSC of all the existing directors of the company.
Company documents
The PAN card, Certificate of Incorporation, GST registration and any other applicable registrations of the private limited company.
Convert into an LLP in three easy steps
Step 01
Answer a few quick questions
- Spend less than 10 minutes on a simple set of questions
- Share the basic details and documents against the checklist
- Pay through a secure payment gateway
Step 02
Our experts take over
- You are assigned a dedicated relationship manager
- Digital signatures are procured and the LLP name is reserved
- Resolutions, incorporation documents and the LLP agreement are drafted
- Form 17 and Form 2 are filed, and PAN and TAN are updated
Step 03
The conversion is complete
- The whole process takes 20 to 25 working days
- The LLP agreement is stamped and filed with the MCA
Subject to government processing time.
How long the conversion takes
Twenty-five working days end to end. The LLP exists from the approval on day 14; the last eleven are PAN, TAN and the agreement.
Days 1 to 2
2 of 25 working days
- Consultancy and assistance for the conversion
- Collection of basic information and documents
Days 3 to 6
4 of 25 working days
- Application for name reservation for the LLP
- Drafting of the necessary resolutions for the company
Days 7 to 14
8 of 25 working days
- Drafting of the incorporation documents
- Filing of LLP Form 17, the application for conversion
- Online filing of LLP Form 2
- Government processing time to approve the application
Days 15 to 20
6 of 25 working days
- Application for the change in PAN and TAN
- Drafting of the LLP agreement
Days 21 to 25
5 of 25 working days
- Payment of stamp duty
- Filing of the LLP agreement with the MCA
- Government processing time
Subject to government processing time.
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What are the conditions for converting a private limited company into an LLP?
Four have to be satisfied before the application can be made:
- All the members of the company become the partners of the LLP on conversion
- No security interest may subsist or be in force over the assets of the company on the date of conversion: they must be free of any encumbrance
- Income tax returns have been filed up to date under the Income-tax Act, 1961
- Any clearance, approval or permission for the conversion required from another body or authority has been obtained
Does anything have to be executed to transfer the assets and liabilities?
No. On conversion, all tangible property, movable and immovable, and all intangible property vested in the company, along with every asset, interest, right, privilege, liability and obligation relating to it, and the whole of its undertaking, transfer to and vest in the LLP.
That happens without any further assurance, act or deed.
What happens to the licences and permits the company held?
The Act provides that on conversion any approval, permit or licence issued to the private company under another Act is transferred into the name of the converted entity, subject to the provisions of the Act under which it was issued.
Some registrations are an exception, GST among them, where a new application has to be filed. In most cases the terms of the licence itself decide whether it can be transferred; otherwise a fresh GST or FSSAI registration has to be obtained.
What are the annual compliance requirements for an LLP?
An LLP has to make an annual filing with the Registrar each year.
Where its turnover is under ₹40 lakh and its capital contribution is under ₹25 lakh, the financial statements do not need to be audited.
What is the essential difference between an LLP and a company?
The internal governance structure. An LLP has more flexibility and fewer compliance requirements than a company.
Can NRIs or foreign nationals be designated partners in an LLP?
Yes. The LLP Act, 2008 allows foreign nationals, including foreign companies and LLPs, to incorporate an LLP in India provided at least one designated partner is resident in India.
The LLP and its partners would have to comply with all the relevant foreign exchange laws, rules, regulations and guidelines.
Is any capital gain payable on the conversion?
It depends on conditions. Any transfer of a capital asset, an intangible asset, or shares held in the company by a shareholder, as a result of the conversion into an LLP, is not subject to capital gains tax.
But where there is a change in shareholding, meaning a change in the profit-sharing ratio, and a benefit arises from the conversion, capital gains would be payable.
How are PAN and TAN obtained in the name of the LLP?
They are applied for after the Certificate of Incorporation of the LLP is issued.
The physical copy of the PAN is received at the registered office once it has been dispatched by the Income Tax Department.
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